Not long after addressing the nation highlighting his government’s performance in the last one year, the great show man of Nepali politics Prachanda dramatically broke the alliance with NC and formed a new alliance with CPN UML in the first week of March, clearly outsmarting his ruling partner Deuba who became like a fish on the dry sand restlessly gasping for air. Maoist Chair moved faster than NC Chair in reaching Oli. He being someone immensely enjoying political power for decades in Nepal, it was natural for Deuba to approach lawmakers belonging to different parties with the sole object of breaking the new alliance. People, however, found this restlessness highly unbecoming of a leader whose party NC was headed in the past by people of high moral and vision such as B P Koirala and KP Bhattari. Good that some NC leaders with little bit of sense still seen in them stopped the power-hungry leader from making these kind of moves and excessively accusing Prachanda of betrayal. Probably as a result of this advice, Deuba stopped fidgeting much and was also not seen publicly leaking the political wound inflicted on him. It isinteresting that despite frequent changes in power equation under Prachanda, he has been getting the confidence vote in the Parliament, the vote of confidence which he received in the House on March 13, 2024being the third he sought and got since he formed the government after the last general elections. UML and NC are taking turn in cooperating with the Maoist leader whose party is at number3 in terms of strength in the Parliament. As per the need and convenience, he has been seen outsmarting not only Deuba but also Oli with whom he shares a love-hate relationship since long. Countering NC’s (mainly Deuba’s) accusation, Prachanda said the new alliance was necessary to protect the constitution and to respect people’s desire for development and to promote broader interest of the country. He also accused some NC ministers of nonperformance. Most Nepalis, however, are indifferent to these kinds of political changes.

Nonperformance of government\s over the years, which is shown by low growth and increasingly difficult living conditions, has thoroughly frustrated people who take even the presentation of annual budget as nothing more than a ritual. Increasingly large number of people have also begun to feel that state affairs are handled by a political cartel consisting of about 4 top partyleaders, both ruling and opposition , who are taking turn in running the show in the country. Indeed, decisions on major issues, mostly related to major scandals, are taken by this unofficial cartel. Notwithstanding the unhappiness of the people about lack of political stability in the country, our leaders have been taking these frequent changes in usual terms, which have been adequately manifested by their actions and utterances. It is interesting that not only Deuba, who sounded very clear about dislodging the government right from day one, NC leader Shekhar Koirala, leading the opposition camp within NC and publicly differing with Deuba on several issues, has gone on record expressing his confidence that NC would soon form a new coalition government. Koirala’s assertion has further cemented the belief that this new alliance would not last long. This kind of observation made prior to the upcoming investment forum is likely to negatively impact the outcome of it and further hurt the already injured economy. Hope Koirala succeeds in giving a stable, meaningful government dislodging the current dispensation. Otherwise people will cease to see the difference between Deuba, waiting for his sixth stint as prime minister, and an untried Shekhar who many hope will sincerely try to work for the betterment of Nepal and its people, given a chance. Any leader with some sense of sincerity towards the nation should understand that theroot cause behind mass exodus of people from Nepal is poverty, which again is the result of improper management of the economy. Indeed, Nepal needs a sincere, honest leader at the top with skills to better manage the slow-moving economy.

Our economy is definitely not doing well, which is adequately shown by data made available by no other than allied government agencies. Notwithstanding some positive signs seen in balance of payment (BOP), current account, massive increase (21 percent) in remittances and foreign exchange reserve (21.7 percent), external trade is still in huge deficit and the country has to rely on imports to meet basic requirement including agricultural products. Indeed, our government and the central bank could be happy about some positive indicators, but one cannot ignore the reality that these remittance-based positive signs on the external front are far outweighed by the unchecked deterioration in our trade position. Last fiscal year (FY2079\80) was the worst FY from several stand points in recent times but the worrying thing is that things are not looking better in the current FY 2080\81, too. It may be noted that compared to the eight months of last FY both export and import have declined in the corresponding period of this FY-export declined by 4 percent and import by 2.7 percent. While decline in import is said to be as a result of ban on import of some item by Nepal government, a sharp decline (42 percent) in official rice import in the 8 months of this FY, due basically to restrictions imposed by India on its export, could also be one contributing factor. Itis, however, believed that illegal import after imposition of Indian restrictions, has kept the supply of rice and prices in the market stable, despite its huge apparent decline in import. Current increase in rice production in Nepal (from 54lakh 86 thousand ton to 57 lakh 24 thousand ton) could have also contributed a bit. As far as the question of augmenting export is concerned, domestic production of exportable items, which could also substitute import, is the only solution. It is, however, very difficult to expect producers to produce more at a time when farmers are wasting their produces on the road due to lack of market. Dairy farmers are accusing dairies, even government-owned DDC, of nonpayment of milk purchased from them since long. Even production-linked budgetary incentive schemes do not produce the intended outcome in such a situation. Further, export items like tea, which has been doing well in recent years, is facing different nontariff barriers as far as its export to India is concerned. In the meantime, data made available show that both acreage under and production of Chaitra dhan(off season paddy) has decreased over a period of three years, production decreasing from 561 thousand tons in FY 2078\79 to 520 thousand tons in FY 2080\81 and cropped area decreased by 16 thousand hectares during the period.

Multifaceted problems confront the economy of Nepal, the much talked about problem in recent days being the one related to debt servicing, whichis a result of government’s failure to collect the intended revenue. It is said that government will need about Rs. 500 billion to service the debt, which has forced the authorities to rely excessively on borrowing, both internal and external. An amount of Rs.126 billion was paid in the eight months of this FY.It may be noted that in the eight months of this FY, public debt has already touched Rs. 2388 billion of which external loans amounted to Rs.1202 billion and internal loan was atRs.1185 billion. It may also be noted that in the eight months, only 45 percent (Rs.645 billion) of the targeted revenue (Rs.1422 billion) was collected. Looking at this lackluster performance, it is almost certain that the authorities will borrow the entire sum (Rs.240 billion) targeted to borrow internally. Nothing with certainty, however, can be said about the wished external borrowing (Rs. 212billion) as its flow has got a lot to do with the performance of capital expenditure because these project-tied loans are released on reimbursement basis. Let us be clear that there is no harm in borrowing from different sources as long as the borrowed money is used for productive purposes but the worrisome fact in our case is that new money is borrowed to pay the money borrowed earlier and to meet unproductive expenses. Further, looking at the progress on capital expenditure front, which is far less than the projected annual debt servicing requirement, it may be difficult to borrow more from cheaper external source.These debacles on several fronts clearly show that not enough is done to achieve the intended growth of 6 percent. Citing low level of internal demand and consumption as the cause, the World Bank has recently made it public that Nepal’s economy would grow by only 3.3 percent, revising its earlier estimate of 3.9 percent. Who should be held responsible for this pathetic situation has remained a big, unanswered question before us?

Prachanda did not spin words in expressing his unhappiness with the performance of some of his Cabinet colleagues, the prominent one being finance Minister Dr. Mahat.It is undoubtedly clear that Mahat failed, as did many of his predecessors, to measure up to the expectation of people but it would be unwise to hold him solely responsible for the mess that the economy is in today. Mahat should not hesitate to confess that he could not arrest the deterioration in the economy but Prachanda and other critics of him should not forget that serious slackness in economic activities or deterioration in the economy started long before he got this post from the Deubas. A highly educated Mahat can also talk about the moderate level of inflation during his period and cite a few cases of improvements seen on the external front in the eight months of this FY. In terms of performance, it will be difficult to put him below his predecessors who had also failed miserably to increase capital expenditure, which remained at Rs. 81 billion (26.82 percent) in the 8 months of this FY.Moreover, people have now clearly understood that a major change in the way this nation is governed is necessary to deliver the goods to the hard-hit people who have not only developed negativity but an attitude of indifference towards state affairs, too. They are clear that corruption cannot be controlled and the derailed economy put back on track as long as Nepal continues to be governed by the cartel consisting of aging and ailing leaders with thoroughly tarnished image. May Lord Pashupatinath continue to save this nation. Happy New Year 2081!

Dr. Rawal is a former governor of Nepal Rastra Bank.